News

The latest happenings in the Melbourne property market. For our Essays and The Secret Agent Report, see our Research page.


Apartment Price Per Square Metre: $2million Market

Earlier this month, Secret Agent released our findings on the price per square metre of apartments in the secondary market. In this bulletin, we look closely at apartments in the upper tier of Melbourne property, exclusively those that have sold for above $2 million.

The same methods from the previous study applied: each floor plan was manually measured for its internal habitable space, and the final measurement excluded external walls or structural elements, outdoor space, car spaces and storage cages. Sales were included only if a price and scaled floor plan were available.

Key findings:

  • This study included 12 penthouses, which are typical assets in the top end of the market.
  • More than half of the sampled apartments have a North-facing aspect, balcony or terrace. This is the most desirable orientation for optimum natural light and passive heating.
  • Apartments in the $2million plus market were 59% more expensive on a per square metre basis than the rest of the market (below $2million).
  • On average, 3 bedroom apartments sold at a higher cost per square metre than 4 bedroom apartments (Table 2).
  • 5 of the apartments were located in period or Art Deco buildings, while the rest were constructed from the 1990s onwards. Most of these newly built apartments were designed by renown architects such as Fender Katsalidis, Robin Boyd, Woods Bagot, Ashton Raggatt McDougall, Bates Smart, or boutique developers such as Neometro.

For this study, 32 apartments sold between the 1st of May 2015 to 31st of May 2016 were analysed. The average sale price for these apartments was $2,571,469. The sample mostly consisted of apartments from the central, inner East and inner South of Melbourne. The average price per square metre for $2million plus apartments was $13,653. The results by suburb are shown in Table 1.

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Bond Yield Update: June

The bond market, even more so than the stock market, is often a key indicator of investor expectations and the overall health of the economy.

Figure 1 shows the RBA reported bond yields on treasury bonds from 90-day bills to 10-year, long term bonds. From March to April this year, long term yields decreased more than short term ones. This is called “flattening” of the yield curve and is often a sign of lower investor confidence and a bleaker future outlook for the economy. From April to May, the opposite effect can be observed: while yields for all maturity dates decreased, the yield curve steepened slightly. The drop in short term yields reflects the RBA’s decision at the start of May to cut the official cash rate by 25 basis points (0.25%).

Blog-1So what has happened since the interest rate cut?

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The Secret Agent Report – The New Student Visa: What This Means for Chinese Buyers and Melbourne Property

We have just released a special mid-month report!

As most of us begin to celebrate the Queen of Australia’s birthday over the long weekend, Secret Agent decided to take a moment to look not to the West – but to the East.

9.4 million high school students in China would have completed the most important college entrance exam in their lifetime as of yesterday. But from the 1st of July, under the Australian government’s new student visa framework, Chinese parents will have a new and cheaper way to afford their children education – right here in Australia.

With an approximate savings of $360,000 by sending children to the top primary schools in Melbourne instead of Beijing, Secret Agent cannot help but feel that a property boom may soon be reignited.

Start reading this report by clicking on the link below:

Register to receive our report monthly and access The New Student Visa mid-month special now!

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The Secret Agent Report – Apartments Price Per Square Metre

We have just released our latest Secret Agent report!

Comparing square metre rates for houses is common and quite simple as land measurement data is readily available. Apartments are slightly different since it isn’t possible to make comparisons based on the land area they are built on. Floor plans are necessary to do this and the plans provided are often lacking full dimensions. Advertised floor sizes are often rounded-up figures that include external walls and non-habitable areas in the total, making them appear bigger than what they really are.

To overcome this, Secret Agent has manually measured the floor plans of apartments sold from January to March 2016 to create a square metre index for apartments in inner Melbourne. This report will showcase our results with an in-depth look at square metre rates for regions, suburbs and particular apartment types.

Start reading this report by clicking on the link below:

Register to receive our report monthly and access the Apartments Price Per Square Metre report now!

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Horizontal-Travelling Elevators

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In the early 20th century it would have been hard to visualise our current urban landscape full of skyscrapers, cars and elevated walkways. Almost 100 years later, it is just as difficult to picture what our future cities will look like.

A glimpse at some of the projects in developmental stages would suggest that we have a lot to look forward to. Take for example what is being achieved with one of the most significant, yet restrictive, elements of modern architecture: elevators.

The concept of the elevator was invented in the Middle Ages. It wasn’t until 1854 that a safety mechanism was designed that would prevent these lifts from falling if the hoisting rope broke. Skyscrapers could then become a possibility, and for the next 150 years or so, elevators would continue to become a staple part of multi-storey buildings. Without any further innovation, the elevator would remain a cable-hoisted box in a single, linear shaft, forcing buildings to comply with its limitations.

Enter ThyssenKrupp, a German industrial group who has developed the horizontal elevator. In 2014, ThyssenKrupp revealed their Multi elevator technology to the world. Using magnetic levitation technology (the same way Bullet trains are powered), the Multi lift system remains cable-free and is not limited to one elevator shaft. These elevators are free to move vertically and horizontally, with multiple units operating within the same shafts. The result is a more efficient transportation system inside and even between buildings.

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Settlement Risk Looms

The development space in inner Melbourne and Sydney is set to be severely challenged. Conversations between Secret Agent and various developers over the past month have revealed their increasing anxiety about potential settlement issues. These developers, who have settlements due in the next 18 months, are worried that many of their apartments may not be able to settle due to the restrictions placed on foreign buyers by local banks. This is likely to have substantial implications.

For some time now, developers have used successful business models to sell their projects directly to Asia. Sales companies who specialise in selling unseen apartments to the Chinese market have made large financial gains. These apartments, many of which are tiny by local standards, have been purposely designed for the overseas market. Committed contracts, once thought to be rock solid, are now on shaky ground.

To understand the problem at hand, let us consider a hypothetical situation. An investor group, on behalf of a developer, sells a small two bedroom CBD apartment to a buyer based in Shanghai. The buyer pays $714,000 for the 68sqm apartment, which is $10,500 per square metre, and pays a 10% deposit. Since the transaction was entered into 12 months ago, the investor has no stamp duty to pay at settlement. It so happens that this purchaser defaults. The developer gets to keep the 10% deposit minus fees. The problem is that there is a need to sell the apartment to someone else.

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Orientation and Your Home

Click here to download Secret Agent’s orientation guide

This week, we’ve put together a short guide to help you maximise the benefits of passive design solutions by understanding orientation in your home. With a particular focus on light and wind, we break down each aspect and offer suggestions for a more environmentally friendly and comfortable home.

North

  • Mornings generally receive Northerly winds from the inland due to land breeze. During winter this is the dominant source of wind. In summer, Northerly winds can be quite hot.
  • Direct sunlight and an excellent source of passive heating.
  • Necessary to use shading methods, such as planting deciduous trees (which permit low-angle Winter sun through) or installing eaves and blinds.
  • Suitable for daytime, living and dining rooms or courtyards.
  • Ideal orientation of the home with the long side facing North, or 20-30° off from the center.

West

  • Be wary of hot Northwesterly winds in summer and cold Southwesterly winds in the cooler months.
  • Evening sun can be quite harsh and hot in summer.
  • Option to strategically plant trees and shrub to divert undesirable winds and provide shading in the evening.
  • Alternative is to place utility areas facing West (e.g. laundry, bathrooms, storage) which insulate and shade living areas.

East

  • Little to no Easterly wind all year round. Design should promote cross-ventilation from other rooms.
  • Direction of sunrise and cool morning light.
  • Suitable for kitchens, breakfast rooms or bedrooms, as morning light is beneficial to regulate our circadian rhythm (natural body clock).

South

  • Evenings generally receive Southerly winds from the ocean due to the sea breeze effect. Southwesterly winds in the cooler months can be quite harsh.
  • Indirect light, therefore requires little to no shading. Borrowed light methods include use of skylights or reflections off neighbouring buildings.
  • Should be properly insulated as there are minimal passive heating options. Active heating may also be necessary.
  • Suitable for bedrooms or artist studios, as South light produces cool and controlled colour values.

The Secret Agent Report – True Capital Growth

We have just released our latest Secret Agent report!

Averages are frequently relied upon to determine key indicators such as capital growth. While an average may be a quick and easy metric to measure a data set, it can also produce very misleading results. This is especially true when looking at the capital growth of a suburb. Changes in average property prices and actual capital growth are not the same thing. There are many factors that determine the price of a house and the average growth in property values. Using more reliable methods, Secret Agent uncovers the true capital growth of suburbs across inner Melbourne.

Start reading this report by clicking on the link below:

Register to receive our report monthly and access the True Capital Growth report now!

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Deflation and Commercial Property

For the first time since December 2008 in Australia, consumer prices have fallen. According to the ABS, the March 2016 quarter saw the consumer price index fall by 0.2%. This is big news.

Whether the deflation numbers are noise or signal, it’s hard to say just yet. However, it poses an interesting question: what would be the impact on the Australian property market if deflation were to creep further into our economy? Secret Agent intends to cover this a little further over the coming month, but for today, let’s look at the impact on commercial property.

Commercial property is a much desired asset for investors. The allure of a lease that guarantees the investor a return over a period of time is highly attractive, especially in a world of low returns. Rent increases every year are a common component of leases and either a fixed percentage increase or CPI measure is used. This begs the question; what happens if we continue to move into deflationary conditions?

While most new leases use a fixed percentage increase, some leases are still using CPI as the rate of increase. Also, many older leases that are still current operate on a CPI basis. We may start to see leases that produce rent decreases for tenants annually and erode the value of some buildings, especially where long leases and terms have been secured by tenants.

The current reality is that negative bond yields are being acquired globally. A world with deflation could mean future tenants secure a fixed rate of decrease over the term of the lease, or negotiate hard for CPI-only leases.

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Lessons from Jan Gehl

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For the fifth consecutive year, Melbourne has been named the world’s most liveable city by The Economist Intelligence Unit’s annual survey. While the ranking is based on a range of factors such as healthcare, culture, education and infrastructure, Secret Agent believes that Melbourne’s success is due to thoughtful urban design.

We owe it to Jan Gehl, the Danish architect and urban designer who worked together with Melbourne City Council in the early 1990s to transform the city from, in his own words, “neutron-bombed, not a soul – not even a cat”, into a place for people. Much of our laneway culture and outdoor dining today can be attributed to Gehl’s visionary thinking and humanistic approach to urban design.

Three main principles can be drawn from Gehl’s work:

1. Design the city at 5km/h

Cities had always been designed for people, who move at a modest speed of about 5km/h, up until the boom of the automobile in the 1960s. New cities were then designed at 60km/h – wider, further apart, less accessible by foot. Gehl’s intervention in Melbourne applied the human scale of the older, 5km/h cities, giving birth to our laneway culture that is now inseparable from the city’s identity. Narrow, dense and brimming with life, there is a certain magic that comes with compact spaces.

Thanks to Gehl and planning changes, Melbourne CBD has gained 20 hectares of footpaths over 15 years. Designing walkable urban spaces encourages people to do so, resulting in a healthier population. Think about how far a person has to walk to get from A to B; is it a comfortable distance? If it necessarily becomes a lengthy walk, can it be a safe, pleasant and eventful journey?

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